International Monetary Fund report validates Canada’s economic response to COVID-19

March 18, 2021 – Ottawa, Ontario – Department of Finance Canada

Today, the Department of Finance Canada welcomed the International Monetary Fund (IMF)’s Staff Report for the 2021 Article IV Consultationto conclude its annual Article IV mission to Canada. The report, which is consistent with the IMF’s preliminary findings released last month, continues to highlight Canada’s “decisive actions and unprecedented fiscal support,” which has helped to limit economic scarring and protect jobs while supporting Canadians and businesses through the pandemic.

The report observed that “Canada’s strong history of prudent policymaking afforded it the policy space to respond forcefully to the crisis, helping it to contain the socio-economic impact of the pandemic.” The IMF estimates that without Canada’s COVID-19 economic response, “real output would have declined by an additional 7.8 percentage points in 2020 and the unemployment rate would have been 3.2 percentage points higher.” The IMF currently projects Canada’s real GDP to expand by 4.4 per cent in 2021 and 4.1 per cent in 2022.

The IMF conducted analysis which shows that had the federal government not acted with its decisive and substantial support, Canada would have reached a similar level of gross debt-to-GDP ratio from reduced output, but there would have been a much broader loss of jobs and GDP.

The IMF acknowledged that Canada’s net debt remains low and that “Canada still does not have substantial fiscal vulnerabilities, partly due to its strong pre-crisis fiscal position and its sizable asset position.”

The report noted that “public health policies and spending were instrumental in containing the initial spread of the virus. . . Crucially, the public health response has been guided by science and expert advice.” The IMF advised that “As the economy transitions from crisis mode to recovery, it is vitally important to keep the spread of COVID-19 under control, and to avoid premature withdrawal of fiscal and monetary support.”

Quick facts

• The IMF’s annual Article IV missions assess the economic and financial developments in a country and include discussions with government officials, central bank officials, parliamentarians and representatives of business, labour unions, and civil society.
• Canada entered the pandemic in a position of strength, with the lowest net debt-to-GDP ratio among G7 peers, a position it still retains.
• Select COVID-19 support measures by the numbers:
  • Canada Emergency Response Benefit: over 8 million Canadians supported through direct payments of $81.6 billion;
  • Canada Emergency Wage Subsidy: $69.31 billion in subsidies to support 433,950 employers and help protect over 5.2 million jobs as of March 7;
  • Canada Emergency Business Account: $44.41 billion for 846,350 loans to businesses across Canada as of March 11;
  • Canada Emergency Rent Subsidy and Lockdown Support: $1.97 billion in subsidies for 138,550 organizations as of March 7;
  • Canada Recovery Benefit: $12 billion provided to 1.76 million Canadians as of March 5;
  • Canada Recovery Caregiving Benefit: $1.65 billion provided to 347,450 Canadians as of March 5; and
  • Canada Recovery Sickness Benefit: $363 million provided to 420,680 Canadians as of March 5.